IT Jobs and the Financial Crisis: What Tech Workers Need to Know

How long will the recession last? Will I get fired? Will I get outsourced? Will I be able to find a new job? This story attempts to answer your most pressing questions about the economy and your IT job.

The only thing that seems clear today is that the U.S. is in a recession and possibly a bad one. No one is certain what will happen next. Events are changing almost by the hour. How much help will a federal bailout deliver to the nation's financial system, which has been hard-hit by the downturn? Will more financial institutions collapse, and how far down will the stock market go? Will you have a job?

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What follows is a summary, in the form of an FAQ, about what we know so far about the impact of this crisis on one of the most important of areas in tech, namely, your job.

If you lose your job will you find a new one? It's obviously not going to be easy. The Corporate Executive Board in Washington surveyed 50 CIOs, and nearly 25 percent said they have imposed a hiring freeze, and half said they are cutting spending on consultants and contractors.

Many of the résumés arriving in human resources departments will list financial services experience. This industry accounts for 20 percent of global IT spending, says research firm IDC. And it is shedding jobs by the thousands, 103,000 jobs overall this year, according to outplacement firm Challenger, Gray & Christmas Inc.

But some skills will always do well in this market. SAP techs are in demand. Financial services may shed midlevel IT managers, but Mary Price, a manager in the technology division of Russell Reynolds Associates Inc., a New York-based executive recruiter, said she expects increasing demand for people in this sector who can integrate platforms and improve risk management systems.

Relocating may help. Unemployment may be 6.1 percent nationally, but in Northern Virginia, where there are large numbers of private sector tech jobs serving the federal government, unemployment is 3.6 percent, up from 2.4 percent a year ago. Check with recruiters. Jill Herrin, president and CEO of JDResources Inc., an IT recruiting firm in Memphis said last week that demand for IT talent "is extremely high."

How long will the recession last? Let's defer to Warren Buffett for the big picture answer. On PBS's Charlie Rose show Tuesday (transcript), the billionaire investor said: "I don't want to hold out false hopes that the—by some magic moment, that things will turn around in a couple months because they wouldn't, Charlie. I mean, and it's a big mistake to try and mislead people. ... I don't know whether it will be six months or whether it'll be two years."

Gartner Inc. and Forrester Research Inc. believe IT spending won't drift into negative territory. IT has outperformed the economy generally, so it's probably reasonable to forecast that. Both analyst firms are looking for improvement by the second half of next year. IDC doesn't believe that IT growth rates will drop to zero or below as they did in 2002 after the dot.com bust. "The worst we would expect for 2009 is a one percent drop in the U.S. and 0.5 percent drop worldwide in IT, less in telecommunications," IDC said. More on these forecasts later.

Will I be outsourced? The harsh reality is this: A database administrator can cost US$90,000 annually, but companies that go offshore can pay $20 or less an hour to have that admin's work done remotely. Offshore outsourcing consultants expect offshoring to increase. A wild card will be the election. Eugene Kublanov, CEO of NeoIT, an outsourcing management consulting group in San Ramon, Calif., said the next president, especially if he is a Democrat, could put in tax incentives to encourage companies to keep jobs here.

But companies that treat IT employees as expendable face a serious downside, as Dale Frantz, CIO at Auto Warehousing Co., recently explained: "The 'churn and burn' approach to hiring and careers in IT has been very destructive, I think, and some of the sad states of current software and system solutions available in our industry reflect that."

Will I get fired? There's a good chance, if this catches you by surprise. ... The same credit tightening that is closing car dealerships, dry cleaning businesses and restaurants may now be aiming at that niche software vendor that just happens to supply your mission-critical software.

What do you do if a critical vendor says he can't cover payroll? Users should double-check their software escrow arrangements, which usually involve putting the source code in the hands of a third party that provides escrow services.

"The bottom line is that you need to make sure that you can get a hold of the source code if that company goes under and ensure that it is the correct version and is valid," said Randy Roth, a partner at Corporate Contracts, an Urbandale, Iowa, contract negotiations firm.

What can I do to avoid getting laid off? What analysts and surveys all seem to agree on is that companies will be deferring new IT projects and cutting where they can until the economic questions are resolved. It stands to reason that stepping up with ideas for savings and learning some new skills, especially virtualization, will be a plus in any organization.

Ken Brill, executive director of the Uptime Institute Inc., has advice about where to start: As many as 15 percent of the servers in any data center are "comatose," and not doing anything useful. Killing those servers as well as server buying with an eye on energy savings can cut thousands of dollars in costs. Companies that virtualize can typically consolidate five physical servers into one, and not having to build a new data center can save millions of dollars.

"Maybe in this downturn efficiency will become more important," Brill said.

This story, "IT Jobs and the Financial Crisis: What Tech Workers Need to Know" was originally published by Computerworld.

Copyright © 2008 IDG Communications, Inc.

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